There is a known issue around the client sometimes not registering that there is a proxy there – even if the URL is correct. This is typically triggered if there is a bit of delay while serving up the file. There is a fix for this that will be in 10.0.5 which should be released any day now. Might be worth holding out for that.
This will sound a bit strange, but you can sometimes get it to work in these cases, by viewing the proxy in a browser first, and then click in the asset and seeing if it notices the proxy. I guess viewing it causes the server to load it into memory which makes the subsequent request quicker.
Anyway – as I say the proper fix should be here very soon.
In terms of large files, as long as they are Fast Start then it will simply stream the start of the file and start playing it almost immediately, while it loads the rest of the file in the background. You can also scrub to another point and the QuickTime Player is clever enough to send a special HTTP Range request to seek to the right part in the file (assuming the server supports that – which I would assume whatever S3 uses would).